1716 THE WEALTH REPORT 2015GLOBAL WEALTH DISTRIBUTION 16

The global population of ultra-high-net-worth individuals grew by almost 5,200 last year, according to data prepared exclusively for The Wealth Report by the analyst firm WealthInsight.

This latest increase means 65,335 people have joined the ranks of the ultra-wealthy over the past decade – a rise of 61%. In total, there are now 172,850 individuals in this cohort who hold wealth totalling $20.8tn, an increase of $700bn during 2014.

Moving up the wealth brackets, nearly 1,180 people became centa-millionaires in 2014, taking the world’s total population of those worth over $100m to 38,280.

At the top of the wealth tree 53 individ-uals became billionaires last year, pushing global membership of this exclusive club to 1,844 – an 82% rise from the number recorded in 2004.

The annual pace of wealth creation also quickened in 2014 compared with 2013, albeit slightly. The number of UHNWIs grew by 3.1% last year, compared with

2.9% in the previous 12 months. But at a regional level the differences were more marked.

Most notably, Asia overtook North America as the region with the second-largest UHNWI growth. Some 1,419 people moved past the $30m+ mark in Asia in 2014, after an increase of fewer than 1,000 in 2013. Europe held onto the top spot with the most new entrants into the ultra-wealthy bracket over 2014.

The ultra-wealthy in Asia now also hold more in total wealth, with net assets of $5.9tn, than those in North America, with $5.5tn. However, with a $6.4tn treasure chest, European UHNWIs still control the most wealth.

Last year’s rise in UHNWI numbers came despite weaker-than-anticipated global economic growth. During 2014 the IMF was forced to downgrade its forecast increase for world output from 3.7% to 3.3%.

Throughout the course of 2014, politi-cal tensions mounted, while increased

For full details of wealth distribution trends and forecasts for each world region and for almost 100 countries turn to Databank, p66

UHNWI population growth continuesThe Wealth Report highlights key current and future global wealth distribution trends

GRÁINNE GILMORE, HEAD OF UK RESIDENTIAL RESEARCH

uncertainty over the ramifications of withdrawing fiscal stimulus measures in the US affected sentiment in many regions.

Towards the end of the year plunging oil prices and the strengthening dollar also hit emerging markets, as well as key natural resource exporters like Nigeria, Russia and Mexico.

Ouliana Vlasova, Head of Content at WealthInsight, says: “The positive outcomes for developed economies at the start of 2014 positively influenced wealth creation. However, that picture changed throughout the year. The growth in wealth could perhaps have been bigger had the world economy picked up more strongly in the second half of last year.”

The outlook for the rest of this year is also mixed. Although the IMF has down-graded its own forecasts for annual growth in world output from 3.8% to 3.5%, this is still slightly stronger than the growth in 2014. Emerging economies are expected to grow by 4.3%, compared with 2.4% for developed economies.

Economic headwinds

There is certainly evidence that beneath the economic headwinds, some central banks and governments have been getting to grips with the serious repair work needed in the wake of the global financial crisis.

However, fears over economic weak-ness in the eurozone prompted the Euro-pean Central Bank to start a programme of quantitative easing earlier this year, a signal of the headwinds still facing devel-oped economies.

Yet the longer-term forecast for wealth creation, anticipating how wealthy popu-lations will have changed a decade from now, is still upbeat. Looking through the shorter-term uncertainties, WealthInsight predicts the number of ultra-wealthy people will grow globally by 34% between 2014 and 2024, up from a forecast of 28% growth between 2013 and 2023 (see graphic for regional predictions).

Ms Vlasova says: “We expect the measures that are being put into place to

UHNWI populations and total wealth by region in 2014

172,850

Global UHNWI population 2014

$20.8tn

Global UHNWIwealth 2014

34%

Predicted global UHNWI population

growth 2014 to 2024

All data provided by

Countries with UHNWI population growth of 5% or above in 2014

Zambia

Mongolia

Namibia

Kazakhstan

China

Uruguay

Iran

Vietnam

UAE

Panama

Hong Kong

Nigeria

Uganda

Myanmar

Monaco 10%

7%

7%

6%

6%

6%

6%

6%

5%

5%

5%

5%

5%

5%

5%

Russia/CIS

2,068Predicted UHNWI 10-yr growth 25%

Total UHNWI wealth $0.6tn

Asia

42,272Predicted UHNWI 10-yr growth 48%

Total UHNWI wealth $5.9tn

Australasia

3,920Predicted UHNWI 10-yr growth 23%

Total UHNWI wealth $0.4tn

Latin America

9,902Predicted UHNWI 10-yr growth 50%

Total UHNWI wealth $1.2tn

Europe

60,565Predicted UHNWI 10-yr growth 25%

Total UHNWI wealth $6.4tn

Africa

1,932Predicted UHNWI 10-yr growth 59%

Total UHNWI wealth $0.2tn

Middle East

7,269Predicted UHNWI 10-yr growth 40%

Total UHNWI wealth $0.7tn

North America

44,922Predicted UHNWI 10-yr growth 25%

Total UHNWI wealth $5.5tn

1918 THE WEALTH REPORT 2015GLOBAL WEALTH DISTRIBUTION

While Monaco is set to double its population of ultra-wealthy residents over the next 10 years, it will not quite keep up with the rate of growth in some other economies, including Vietnam, the Ivory Coast, Kazakhstan and Indonesia, which are forecast to see the largest increases in UHNWI populations over the next decade (see chart above).

We identified Kazakhstan last year as a country to watch, and this is still the case. It is set for a 114% increase in UHNWIs over the next 10 years, much higher than the 46% growth forecast for neighbouring Russia. Indeed, most of the CIS countries are set to outperform Russia in terms of UHNWI growth – not only because of the military and fiscal turbulence in the country, but also because of the trend in Russia for those who have amassed wealth

to base themselves overseas. Almost one-third of Russian UHNWIs would like to change their domicile, according to the Attitudes Survey.

Indonesia, which is expected to see 132% growth in the number of ultra-wealthy people by 2024, is the only MINT country where 10-year forecast growth exceeds 100%. Jim O’Neill, former Chair-man of Goldman Sachs, popularised the acronym MINT for Mexico, Indonesia, Nigeria and Turkey, identifying them as the new engines of economic growth.

Nigeria comes close to Indonesia with 90% forecast growth in UHNWIs. It is striking, however, that even this level of growth is not enough to clinch the top spot for Africa, which is taken by the Ivory Coast (+119%). Deon de Klerk, Head of International Private Clients at Standard

safeguard against another financial crisis will contribute to improved economic conditions over the next decade, coupled with government initiatives to create more entrepreneurs – one of the main drivers of millionaire growth.”

Asia is set to lead the way, with another 20,127 people likely to see their wealth move past $30m during the next decade.

Looking in more detail at our data, which includes a comprehensive analysis of wealth distribution for over 100 countries, we see a number of other key trends emerge.

Despite the turbulence in some cor-ners of the global economy as a result of renewed political tensions and fiscal uncertainty in 2014, some countries expe-rienced particularly strong wealth crea-tion last year, with UHNWI populations expanding by 5% or more in 15 countries (see chart on p18).

Twelve of these countries were emerg-ing economies, underlining the fact that despite concerns about the easing of the pace of growth in developing economies, they are still key drivers of wealth crea-tion.

But it is also notable that it was Monaco, the well-established hub for wealth, that topped the list for growth last year, with a 10% expansion in its popula-tion of UHNWIs. The number of centa-

In terms of sheer numbers,

the US will still be the

dominant force in terms of its ultra-wealthy population in

2024

Countries with highest forecast growth in UHNWI populations, 2014-2024

millionaires (those with over $100m in net assets) in the principality jumped by 10% in 2014, far above the European aver-age of 3.2%, while the number of billion-aires rose from 11 to 12 (see chart on p21).

It is likely that the tax-free environ-ment and low entry hurdles for residency in Monaco have become a greater draw for those concerned by discussions of increased taxes on wealth and assets. Indeed, our Attitudes Survey (p10) high-lights that one of the biggest concerns for UHNWIs across the globe is a potential increase in wealth taxes.

In terms of sheer numbers, the US will still be the dominant force in terms of its ultra-wealthy population in 2024, with the data forecasting a 25% increase in UHNWI numbers to almost 51,000, the biggest concentration in any single country (see chart on the right).

Wealth equality

But when looking at these wealthy residents as a proportion of the country’s total population, the US, with 12 UHNWIs per 100,000, is outgunned by 19 countries including New Zealand and the UK (see chart on p21). Unsurprisingly, Monaco tops the list with an equivalent rate of 574 per 100,000.

Bank, Africa’s largest bank, says: “Africa has the highest potential for growth of any region at the moment. Reforms in Nigeria have been expedited, helping the country build credibility among foreign investors. It is an exciting time.”

When we look at the amalgamated expectations for growth in UHNWIs, the MINT countries, with average expected uplift of 76% over the next decade, nar-rowly defeat the BRIC countries (Brazil, Russia, India and China), which have an average forecast growth of 72%. How-ever, they both far outstrip global average

MIDAS TOUCH Monaco’s population of UHNWIs is set to double by 2024

Mongolia

110%

Vietnam

159%

Indonesia

132%

Venezuela

115%

Ivory Coast

119%

Kazakhstan

114%

Number of UHNWIs per 100,000 people

Breakdown of Monaco wealth tiers (2014)

MillionairesUHNWIsCenta-millionairesBillionaires

11,924

217 22

12

Monaco574

Luxembourg113

Singapore60

Switzerland54

Norway50

New Zealand24

UK17

Germany14

Japan13

US13

Russia0.9

FORECAST TOP FIVE UHNWI

POPULATIONS IN 2024

Japan

China

Germany

UK

US

50,767

19,916

15,681

14,481

13,176

20GLOBAL WEALTH DISTRIBUTION

forecast growth (34%) and the average increase expected across the G8 (28%) over the next decade.

In China, policymakers are under increasing pressure with questions over economic growth mounting as well as political tensions surfacing in Hong Kong. However, Gabriel Sterne, Head of Global Macro Investor Services at Oxford Economics, says there is room for more education and financial deepening in the country. “We still see China as a success story, and it should continue to catch up in terms of productivity,” he says. Cer-tainly by 2024 China is not only set to be the largest economy in the world, but will boast nearly 15,700 UHNWIs and 338 billionaires.

Meanwhile, elections in India and Bra-zil have sparked opportunities for more economic growth. India has seen a 166% rise in UHNWIs over the past decade, and with the new Indian government com-manding a majority in the lower house for the first time in three decades, there is real opportunity to introduce far more transparency. That in turn will boost for-eign investment. WealthInsight forecasts a 104% increase in India’s UHNWIs over the next decade.

Last year’s election in Brazil, and the ensuing interest rate rise by the country’s central bank, flexing its independent muscles, could start to shore up the

Brazillian economy. There is still much work to be done, including offsetting the falling prices for key Brazilian exports. However, despite this, the growth of Brazil’s UHNWI population over the next decade is expected to outperform the global average, at 50%.

Eurozone difficulties

The difficulties in the eurozone over the last year, with Germany narrowly avoid-ing another recession, are not over yet. The economic grouping faces a potential-ly painful re-balancing of the economy, driving productivity as well as consump-tion in the coming years. This is re-flected in our data, with many eurozone countries seeing a slightly lower level of growth in ultra-wealthy populations than the global average. However, the newest entrants to the eurozone – Latvia, Lithua-nia and Estonia – are set to outperform in the next decade, albeit from a low base. The UK, which had the fastest-growing economy in the G8 last year, is set to see 100 billionaires by 2024, making it the fifth-highest hub for billionaires in the world behind the US, China, India and Russia, each of whose overall population significantly outnumbers that of the UK. For more wealth distribution numbers see Databank, p66.

OLYMPIAN ENDEAVOURS UHNWI population growth in Brazilian cities like São Paulo is set to outperform the global average

Global pyramid of wealth 2014

Billionaires1,844

Centa-millionaires 38,280

UHNWIs172,850

Millionaires

17,808,831

Total population

7,290,912,784*

*As of 15:48 GMT 27 January 2015Source: WealthInsight, worldometers.info

WEALTH TAXES: THE GREAT DEBATE

The debate about income inequality (see graphic below) and wealth taxes gained traction during 2014, not least because of the wide discussions around the ideas of Thomas Piketty, a French economist who argues that there should be a global wealth tax on the richest in order to redis-tribute money to the poorest in society. The well-respected OECD has also highlighted that inequality can curb economic growth, arguing that using tax and transfers to tackle inequality can be effective as long as the policies are highly targeted, aimed at not just the very poorest but the poorest 40% of the population, particularly focus-ing on education.

Yet other economists point out it has been proved that high marginal tax rates can decrease productivity and inhibit entrepreneurialism, as those who suc-ceed are faced with the prospect of much higher levies. Dr Pippa Malmgren, founder of DRPM Group and former economic ad-visor to US President George W. Bush, argues that instead of focusing on taxing wealth brackets, there should be more emphasis on creating more wealth for all. In her book Signals, published earlier this year, she argues that instead of increasing tax levies, governments should be cutting them, especially for entrepreneurs and small businesses: “The argument seems to have swung to distribution, when in fact it should be about productivity. It is essential that the policymakers focus on innovating and growing their economies.”